According to the rating agency Moody, RBI may cut the interest rates in the upcoming monetary policy review in August 2015. The Moody's Analytics represents that the hike in CPI inflation was majorly due to base effect.
"We still think the Reserve Bank of India will deliver another interest rate cut in 2015," Moody's Analytics associate economist Faraz Syed said in a research note.
The inflation rushed to 5.4 per cent in June that is an eight-month high number. It was 5.01 per cent in May 2015 and 6.77 per cent in June 2014.
"Despite higher CPI inflation, the RBI will deliver another rate cut at its upcoming monetary policy review scheduled for August 4," it said.
Inflation plays an important role in the monetary policy. RBI considers it as a crucial factor. The IIP (Index of Industrial Production) has been slowed down to 2.7 per cent in May from 5.6 per cent. It is boosting the demand for a rate cut from RBI.
In the June 2 policy review meet, the RBI had slashed repo rate by 0.25 per cent for the third time this year to encourage investment and growth. The Repo rate is 7.25per cent after the rate cut in June and cash reserve ratio (CRR), and statutory liquidity ratio (SLR) is 4 per cent and 21.5 per cent, respectively.